BQuick On Oct. 22: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s stories in brief.
1. Whistleblower Complaint Haunts Infosys Again
Shares of Infosys Ltd. dropped the most in more than six years after an anonymous whistleblower letter alleged that its Chief Executive Officer Salil Parekh dressed up the company’s books.
- The letter from a group of “Ethical Employees” accusing Parekh of unethical practices in “recent quarters” to boost short-term revenue and profits.
- Chairman and co-founder Nandan Nilekani pledged a full investigation, saying the allegations had gone before the company’s Audit Committee.
- The audit committee has retained the law firm of Shardul Amarchand Mangaldas & Co. to conduct an independent investigation into the allegations.
Most analysts turned cautious on the IT firm but awaited more clarity before revising their outlook on the stock.
It’s a deja vu moment for Nilekani, who returned to the company two years ago during a previous leadership crisis, writes Andy Mukherjee.
- It might not be a bad idea for a buyout fund to step in and take Infosys out of the glare of the public markets.
- As a private company, it could rediscover its moorings and find a new purpose in a digital world where clients increasingly want nimble, cloud-based, on-demand software, rather than clunky, on-premise enterprise solutions.
After a period of rehabilitation, Infosys should be able to deliver all its three targets.
2. Earnings: Asian Paints, Axis Bank, Bajaj Finance, Kotak Mahindra Bank
Asian Paints Ltd.’s quarterly profit rose, beating street estimates on deferred tax reversal.
- The paintmaker’s profit rose 67.5 percent over last year to Rs 823.40 crore in the quarter ended September, it said in a exchange filing. That compares with the Rs 677-crore consensus estimate of analysts tracked by Bloomberg.
- The company made a deferred tax reversal to the tune of Rs 149.7 crore in the current quarter.
- Revenue rose 9.4 percent to Rs 5,050.70 crore—analysts had forecast Rs 5,220.5 crore.
- Chief Operating Officer Amit Syngle will succeed Chief Executive Officer KBS Anand, who will retire on March 31, 2020, the company said in a separate release.
- Chief Financial Officer Jayesh Merchant, who will retire on Nov. 26, will be succeeded by Vice President (Finance) RJ Jeyamurugan.
The board has also approved payment of interim dividend of Rs 3.35 per share.
Axis Bank Ltd. reported a loss in the quarter ended September despite a fall in bad loans as it recognised a one-time tax impact.
- The Mumbai-based private lender reported a net loss of Rs 112.1 crore.
- The loss was due to a one-time tax impact of Rs 2,138 crore.
- Because of the corporate tax rate cut, the value of future relief through deferred tax assets will also fall proportionate to the tax reduction.
Bad loan ratio fell but the bank expects slippages to remain elevated due to the current macroeconomic situation.
Bajaj Finance Ltd.’s quarterly profit beat estimates as it booked a greater number of new loans.
- Net profit rose 63 percent year-on-year to Rs 1,506 crore.
- Net interest income, or the non-bank lender’s core income, however, rose 41 percent to Rs 3,138 crore—much lower than the Rs 3,786-crore estimate.
The rise in new loans comes despite slowing consumption in India.
Kotak Mahindra Bank Ltd.’s quarterly profit rose, meeting analyst estimates, even as its asset quality weakened.
- Net profit rose 51 percent year-on-year to Rs 1,724 crore.
- Net interest income, or core income, of the bank rose 25 percent over the last year to Rs 3,350 crore in the three-month period—against the estimated Rs 3,284 crore.
There were signs of conservative lending in the decline in credit growth.
3. Adani Realty-DHFL Stressed Projects Deal?
Dewan Housing Finance Corporation Ltd. is in talks with Adani Realty to take over some of the stressed real estate projects funded by the housing finance company, three persons familiar with the discussions told BloombergQuint on condition of anonymity.
- Adani Realty is looking to take over development of a few large real estate projects funded by DHFL, including slum rehabilitation projects, under a master-developer agreement, two of the people quoted earlier said.
- The outstanding loans from DHFL to these projects are close to Rs 20,000 crore, these people said.
- The agreement will involve completing development, including managing the sales process, one of the three people quoted earlier said.
The realty firm would need to bring in funds to complete the projects.
4. Nifty Snaps Six-Day Gaining Streak; U.S. Stocks Mixed
Indian equity benchmarks halted their six-day winning streak, their longest stretch of gains in seven months.
- The S&P BSE Sensex fell 0.85 percent or 334.54 points to close at 38,963.84.
- The NSE Nifty 50 fell 0.63 percent to end at 11,588.35.
- The market breadth was tilted in favour of buyers.
- Seven out of 11 sectoral gauges compiled by the NSE ended higher.
Follow the day’s trading action here.
U.S. stocks were mixed as investors weighed a flurry of corporate earnings. Treasuries advanced.
- The S&P 500 Index pared gains, led by commodity, consumer and financial shares.
- The U.S. dollar was little changed.
- West Texas Intermediate crude jumped 1.2 percent to $53.93 a barrel.
Get your daily fix of global markets here.
5. Another Bureaucratic Reshuffle By Modi
The government has appointed Tuhin Kanta Pandey as secretary of the Department of Investment and Public Asset Management.
- This came after incumbent DIPAM Secretary Anil Khachi was repatriated to his parent cadre citing personal reasons, according to a government order.
- It also appointed Pankaj Kumar, the current additional secretary at the Ministry of Electronics and Information Technology, as the chief executive officer of Unique Identification Authority of India.
- Revenue Secretary Ajay Bhushan Pandey so far headed the Aadhaar issuing authority.
- Among others, Nagendra Nath Sinha, chairman of National Highways Authority of India, has been appointed as the secretary of the Department of Border Management under the Ministry of Road Transport and Highways.
Here are the other appointments.
6. The Outliers Amid The Manufacturing Slowdown
Amid everyday stories about a slowdown, some manufacturing industries have defied the gloom on the back of changing consumer preferences and continuing government spending. The outlook, however, is contingent on a broader pick-up in the economy.
- The index of industrial production contracted 1.1 percent on a yearly basis in August. The index rose 2.4 percent from April to August and manufacturing—with the largest share in industrial activity—grew 2.1 percent.
- Of the 23 industry groups in the sector, 14 contracted. But food products, wearing apparel, wood and basic metals—that make up about a fifth of the index—grew more than 10 percent during the period.
- The pace was even higher than in FY19 when these industries, except for basic metals, expanded in double digits.
Here’s why these four manufacturing sectors defied the slowdown.
7. Where Are The Overseas Fliers?
Profitability of India’s two largest airlines by market share may dip as passenger traffic growth hasn’t kept pace with capacity addition, bringing down occupancy levels and keeping ticket prices low.
- IndiGo, the nation’s biggest carrier operated by InterGlobe Aviation Ltd., and second-placed SpiceJet Ltd. nearly doubled their capacity on international routes in August, according to BloombergQuint’s calculations.
- Indian carriers began adding capacity to plug the supply gap created by Jet Airways (India) Ltd.’s shutdown in April.
- But that additional capacity was not complemented by a similar growth in the number of air passengers, forcing airlines to fly more seats empty.
Still, this capacity addition could yield results in the long run. Here’s how.
8. Why Lodha Is Pivoting From Luxury
One of the most prominent real estate developer in Mumbai, India’s financial hub, is shifting focus to cheaper apartments and office space as a credit squeeze crimps demand for posh properties.
- Macrotech Developers, earlier known as Lodha Developers, will cut the share of premium housing from its portfolio to about 17 percent from 30 percent, said Managing Director Abhishek Lodha.
- It’s also looking to increase contributions from so-called affordable housing to about 50 percent of revenue over the next three to four years from 40 percent.
- “All our new investment is going in affordable and office,” Lodha said in an interview at the company’s premium World Towers residential project in Mumbai.
Lodha has recently started a new business line to offer apartments as cheap as Rs 25 lakh.
9. Curbing Trade With Turkey And Malaysia Over Kashmir?
India is considering placing curbs on some imports from Turkey and Malaysia, in response to their leaders’ comments on the autonomy of Kashmir, people familiar with the matter told Bloomberg News.
- Prime Minister Narendra Modi’s government is exploring the possibility of both tariff and non-tariff measures to limit import of goods from the two countries, the people said, asking not to be identified as a final decision is yet to be taken.
- The options include stringent quality tests and a safeguard tax in addition to existing levies, they said.
- While India’s bilateral trade with the two was only 2.9 percent of its total in the fiscal year ended March 31, New Delhi enjoys a trade surplus with Turkey and runs a deficit with Malaysia on account of its reliance on imported palm oil.
There is an informal instruction from India’s foreign ministry to go slow on all diplomatic and business relationship with Turkey and Malaysia.
10. Abhijit Banerjee’s Growth Mantra
How do you spur demand in an economy? By raising taxes, not cutting them, says this year’s winner of the Nobel prize for economics.
- Reducing taxes to boost investment is a myth spread by businesses, says Abhijit Banerjee, who won the prize along with Esther Duflo of the Massachusetts Institute of Technology and Michael Kremer of Harvard University for their approach to alleviating global poverty.
You are giving incentives to the rich who are already sitting on tons of cash.Abhijit Banerjee, Nobel Prize Winning Economist
- A better approach would be to raise some taxes and distribute the money to people to spend, Banerjee said in an interview Monday in New Delhi, where he was promoting his book ‘Good Economics for Hard Times.’
- Countries from China to India to Indonesia are slashing taxes for businesses to spur growth.
But Banerjee thinks that won't fix the economy.